Correlation Between Naked Wines and Maison Solutions

Can any of the company-specific risk be diversified away by investing in both Naked Wines and Maison Solutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Naked Wines and Maison Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Naked Wines plc and Maison Solutions, you can compare the effects of market volatilities on Naked Wines and Maison Solutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Naked Wines with a short position of Maison Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Maison Solutions.

Diversification Opportunities for Naked Wines and Maison Solutions

-0.68

Correlation Coefficient

Naked Wines  Maison Solutions

Excellent diversification

The 3 months correlation between Naked and Maison is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Maison Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maison Solutions and Naked Wines is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Naked Wines plc are associated (or correlated) with Maison Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maison Solutions has no effect on the direction of Naked Wines i.e., Naked Wines and Maison Solutions go up and down completely randomly.

Pair Corralation between Naked Wines and Maison Solutions

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Maison Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 4.96 times less risky than Maison Solutions. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Maison Solutions is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Maison Solutions on September 30, 2024 and sell it today you would earn a total of  31.00  from holding Maison Solutions or generate 32.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Naked Wines plc  vs.  Maison Solutions

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Maison Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maison Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Naked Wines and Maison Solutions

The main advantage of trading using opposite Naked Wines and Maison Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Maison Solutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Maison Solutions will offset losses from the drop in Maison Solutions' long position.

The idea behind Naked Wines plc and Maison Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.